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Harding v Revenue and Customs Commissioners

[2008] EWCA Civ 1164; [2008] All ER (D) 233 (Oct)

Court: Court of Appeal

Date of Judgment: 23.10.08

Ruth Jordan

An appeal to the Court of Appeal on the construction of s.117(1)(b) of the Taxation of Chargeable Gains Act 1992. The issue was whether a loan note in respect of which a foreign currency redemption provision had lapsed was "a provision in respect of which no provision is made for redemption in a currency other than sterling" and as such could be classified as a qualifying corporate bond for the purposes of exemption from a charge to capital gains tax.

Appeal dismissed. The appeal could be disposed of without any departure from the plain meaning of the words in s. 117(1)(b). The key to the interpretation of s. 117(1)(b) was the word "provision". If one were to ask whether, on the date of issue, provision was made "in respect of" the security, meaning the agreement represented by the loan notes and the terms embodied in them, there would be no doubt on any possible view that provision was made for conversion. If the same question were to be asked at the date when the currency conversion right lapsed or when the loan notes were redeemed the answer would be the same, namely that "provision " was made, even though the right could no longer be exercised. The word "provision" was a reference to the terms of the agreement, and not simply to subsisting rights. There was no need for s. 117(1)(b) to have the phrase "at all times" because it was looking to the terms of the agreement and not to rights which might have existed under it from time to time. The distinction between "debt on the security" and "security" in s. 117(1)(a) and (b) did not determine the outcome of the appeal, Weston v Garnett (Inspector of Taxes) [2005] EWCA Civ 742, [2005] S.T.C. 1134 considered. There was no contrast between a literal construction and the purpose of the legislation, nor any need for a special construction to avoid anomalies.